And it's spot on. However there's other factors at play here. It's also due to extreme lack of liquidity which has made it very easy for the Banks/firms to do stop runs as there were a LOT of stop losses just above the local resistance of $20.50. So once all of those stops (including mine!) were hit, that massive amount of short orders closing = net long. Also combined with the fact that JPM are winding down their commodity prop office, there's not so much overt naked shorting going on at the moment
. However despite price action blasting through resistance, I still think Gold and Silver have more falling...but don't get me wrong, I'm still expecting Gold and Silver to at the very least rise by 500% within the next 1-5 years and Silver going to parity with Gold within the decade...

Wednesday, 24 July 2013

As you probably know by now, financial professionals don’t
really like me. Quite a few IFAs have actually called me a conspiracy kook and
that I’m spreading information which is misleading to the public. I still find
this amusing considering all I’m doing is spreading cold hard facts. Facts
which the media doesn’t know or just won’t publish. This includes the Financial
Times by the way. Also I still haven’t met a financial professional who predicted
and prepared for the 2001 Tech collapse or the 2008 meltdown. And just like
those instances, I’m still yet to meet one who is preparing for the mother of
all crashes, the crash of 2013/14/15/16/17/18. Unfortunately I don’t have a
crystal ball and so I can only forecast this for sometime in the next 5 years,
but this one will be many orders of magnitude greater than the 1929 Great
Depression. How do I know? Trends. But this will be a topic for another
edition. This rant is solely for Government Stats and was sparked due to a
twitter conversation I was having with an IFA and he said that when investing
you can and should only plan using the Government figures as they are the
facts. Now this is incredibly short-sighted on his behalf and if he did a tiny
bit of due diligence instead of blind trust, he’d see my point. So here are the
main lies:

Inflation

According to the Government, UK inflation right now is 2.7%.
Now this is the most farcical of all stats as it’s becoming almost common knowledge
that REAL inflation is near 10% now. The way they calculate inflation is by
taking a metaphoric ‘basket of goods’ which the public buy from day to day like
bread, milk, cars, iphones and CDs etc. (But
funnily enough, not rent or houses. They used to, but they took it out of this
calculation in 1983 as they started to inflate the housing market). So they
just compare the prices of this basket to last month, last year, last 5 years
etc and plot a graph. So right now they’re telling us it’s 2.7%. Well what they
fail to realise or purposely ignore is that EVERYTHING in that basket is now
smaller or of less value than previous times. For example, let’s take a
Snickers bar (my favourite). In 2003, they were on average 30p. But now, they
average around 60p. In fact I’ve spent around 90p in some places, so in 10
years, the price has increased by 100% minimum! AND they are all now 7.2%
smaller. This same stat applies to everything else in the basket. So when you
crunch the numbers, REAL inflation is near double digits.

GDP

Recently the US GDP calculations have been changed. They are
now including Research and Development (R&D) spending as part of the
revenue. Now this is absurd. The US spends more money on Military (R&D)
than every country in the world combined. Even their medicine R&D dwarfs
other nations. Now it could be argued that medicine R&D could produce more
efficient medicines which would positively bring more revenue in, but it’s
negligible. Military R&D has next to no productive use (other than for war)
and so this ‘ploy’ is something which will make the US Debt to GDP ratio not
look as bad as it really is. They’re the only country in the world to do this
but it probably won’t be long before the UK follows suit in order to hide our
problems.

Jobs/Unemployment Data

This is a huge topic which I could ramble on for but in a
nutshell, when calculating these figures, they are now on purpose stretching
the parameters of what a full-time employed person really is. They are now
counting people with a ‘part-time job but are seeking a full-time job’ as
‘fully employed’. They are including some forms of charity/volunteer workers as
‘fully employed’ many other profiles. But they’re doing it on the other end of
the scale as well by classing some people without a job but are seeking
employment as ‘part-time’ employed and so on. So they’re trying to make these
figures show that unemployment isn’t as bad as it really is when the poor/rich
divide is increasing dramatically! Just have a look at the BBC Documentary
‘Skint’ – it’s shocking but a real insight into the UK’s deprived areas.

Housing Data

Again, another topic which I could bore you on but this one
is probably as laughable as the inflation data. For some reason the Government
likes to promote to the public that a rising housing market means that the UK
economy is improving. And as the public are grossly ignorant with these and
investing matters, we just nod and accept what we see in the news etc. So 2
points here: i.) The housing market is NOT a reflection on how our economy is
doing, and ii.) The Government is now openly trying to pump up this market
again with 95% mortgages! Also when you look at US housing data that’s even
more of an exaggeration. What they fail to show us is that the Fed is buying up
$85 billion a month of Mortgage Backed Securities, other toxic bonds and also
at least 70 000 empty homes per MONTH using proxies.

So there you go. Hopefully you can now see that we need to
at the very least question what we get told. Housing, employment, GDP and
inflation data is rigged which I hope I’ve demonstrated and that’s only the tip
of the iceberg. If they are rigging interest rates, imagine what else they are
doing. So when you’re next going to buy a mortgage, invest in the stock market
or pensions etc, just please do a double check of REAL adjusted data, not
nominal data which gets published. www.ShadowStats.com
is a great site for real data…

As a nation, it seems as though we're doomed to repeat our
past failures. It feels as though we're living in 2005 all over again as the
Government has decided to try and artificially pump up the housing bubble
again! Just in case you weren't aware, one of the main reasons for the 2008
Melt Down was because the US and UK Governments were inflating the 'Sub-Prime’ market.
This basically means that they were giving pretty much anyone a mortgage
whether the borrower could afford the mortgage or not.

So fast forward to 2013, the UK has got into bed with the US again with another
stinking policy and is now offering 95% mortgages.
This may be great news for the 1 million renting young couples (18-35 years
old) in the UK who have been refused a mortgage within the last 5 years, but
when you really investigate things, it has shockingly
awful consequences for the new home owners, the future housing market and the
Government.

Reports show that this 95% mortgage scheme has received great interest from the
public. This isn’t surprising considering that we in the UK and US are
literally obsessed with owning a home due to the Thatcher-Reagan era starting
the theme that everyone should be a homeowner. This isn’t the case with other
countries around the world. Even on our doorstep, France and Germany are
predominantly renters. Most people I speak to on this subject all follow the
same thinking - ‘Rent money is throwing
money down the drain when it could be used to pay off a mortgage’. I don’t
exactly agree with this mentality (but that’s another topic). So now these 1
million couples are rushing in to buy a new house, what does this mean? What is
likely to happen? Why is this bad for all parties?

-Bad
for the new home owners. The majority of the homes which come with a
95% mortgage are new builds. Although attractive on the face of it all, these
new home owners are moving into houses which are rushed into construction,
composed with the cheapest materials and built with shoddy tradesmanship. Due
to targets and deadlines, a large percentage of these houses experience teething
problems down the line. Just speak to
any builder or tradesman and they’ll tell you how crud these houses are and
that within 2-10 years, serious work will be needed on them. Also on top of all
that, the new homeowners are instantly 20% down at the very least. In order for
these building contractors like Bovis etc to make a profit out of this, they
have hiked up the premiums for each house. So
you’re using extreme financial leverage to buy an overpriced shoddy house which
will require on-going repairs down the line and you’re already in negative
equity.

-Bad
for the housing market.It’s likely that the UK housing market will
temporarily boom in prices due to this Government scheme. Eventually the
letting side of the property market will wane as all of these renters become
home owners which will make rents slide (good for renters I guess). However
just like we’ve seen multiple times already, in order to curb this rapid growth
in house prices, the Bank of England
will be forced toraise rates. This
is another bad thing for these new home owners.

-Bad
for the Government. Due to the raising of rates, the UK will end up
more in debt as the interest on our £1.2 Trillion debt will increase greatly,
mortgage repayments will go up and those on a Standard
Variable Rate or tracker mortgage will get severely burned! The
UK will be a repo nation.

Most people fail to stress test their property portfolio or
mortgage repayments properly so here's my quick rule of thumb to see whether
you will be able to keep the Bank from repossessing your house or not:

1.) On a £100k house, for every % rates go up,
your monthly mortgage repayments go up by £83. So on a £200k mortgage, if rates
went up by 1%, you'll have to fork out an extra £166 per month if you don't
have a fixed rate mortgage.

2.) UK average rates are between 7-9%, so at the very least, let's work to 7%. So if
you have a £200k mortgage and rates rise by 7% (which I can GUARANTEE it
will happen), can you afford to pay an extra £1162 per month for your mortgage?!
In fact, where would the UK find an extra £301 Billion to service this
increased interest? – Fancy new taxes…

If the answer is no to that
last question, please have a serious
rethink with your IFA or mortgage advisor. I don’t give advice
(and never will), but a straight forward solution to this pending problem would
be to fix your rates for as long as possible. Definitely longer than 5 years!
Rates are at rock bottom now and they can't go any lower. But one thing is for
sure, rates will go up to historic averages at the very least and when this happens, people will lose their
homes so please make sure you spread the word and to just question your current
situation…

Monday, 13 May 2013

Almost every Sunday lunchtime, Ellie and I go to this lovely
Chinese restaurant in Norwich for some Dim Sum. If you haven’t tried it, try
it. It’s great. Now my parents have known the owners for years and they started
off as a really small restaurant and have now grown into a rather large outfit.
The same goes for a lot of the other notable Chinese cuisines around here. But
one thing I've noticed is that over the last 5 -15 years, there’s been a large
influx of Chinese families moving over here. But there’s a stark difference
between these families compared to the Polish and other nationals that have
migrated over here. The Chinese families
tend to be rather wealthy. I’m aware that my findings may be influenced by
my social group and contacts, but this apparently isn't just localised to
little old Norfolk. I've slowly been spreading my feelers out across the UK for
months now and it’s the same story. When comparing the wealth of immigrant
families, the Chinese sector grossly outweighs the other nationalities in terms
of wealth.

But why?

More light was shed on this when I had a rather candid drink
with my friend. He’s Chinese, his family moved over here in the last 20 years
and they are very wealthy. He said that in China the Government are extremely
strict with all sorts of freedoms we take for granted such as heavily filtered
internet etc but also with investments. Chinese
citizens are banned from investing overseas and are only allowed to invest
in a small selection of products which their Government sees fit. (And I thought the FSA was bad!). But 15
years ago, their Government allowed the public to invest in property.

As a result there is
a property bubble which is grossly
bigger than our Western Housing Bubble which popped in 2007/8. This new
investing freedom opened the flood gates for the rising middle class and they
began investing with 3 generations worth
of family savings. This effectively started China’s historic growth out of
poverty and so they wanted more growth. The Government then shamelessly
promoted to their public that everyone should buy a house or 10 and that
property prices always rise! (We've heard
this one before). As a result, the average
middle class family now owns between 5-10 apartments! It’s now got to the
point that they’re building 16 cities
(the size of Birmingham) a year!

Not only that, they’re building 82 new airports by 2015 and over 20 of them will be BIGGER than Heathrow. This has created dozens of ghost cities and
districts. There are at least 3 districts (the size of East Anglia) whereby
every town and city within it whereby every building has been bought, but are
empty. 71 million empty uninhabited
homes to be precise…(that’s the same as having the UK, France and Italy
completely uninhabited).

The top 10 cities with the worst price bubbles in the world
are in China and the average house price in Shanghai is more than 55 times the
average wage. I met an IFA the other day who said that ‘this whole Chinese
property bubble is a myth’….just look at the stats!

However they've hit a temporary road bump. Though the 2008
crisis only slowed their property bubble ever slightly, it evidently gave their
Government a reality check and so in 2011 they forced a
1-investment-house-only-policy. Similar to their 1 child policy. This then
reduced the amount of money going into their bubble, house prices plunged and
it affected their work force of 50
million construction workers first. They were simply not getting paid, so
lots of them walked away. This has left dozens of cities being half built and
developers bankrupt. But it wasn't enough to pop this ‘hyper bubble’.
Unfortunately they are still inflating it and are continuing to build the world’s tallest building, 4 space ports and
a 860 mile long aqueduct. The aqueduct alone is costing them $62 Billion. I’m
afraid that the whole of their middle class and a big chunk of their upper class
will be completely wiped out when it finally does ‘POP’. I feel especially
sorry for their middle class who will lose 3 generations worth of family
savings and more…

However there is a Silver lining which may save some
families. In 2011 the Chinese Government added a new product to their public
investment basket – Silver bullion. Not only that, they’re encouraging citizens
to buy as much as they can, and boy they’re buying a lot of it…

This is the world largest portable phased array radar. It's called the SBX-1 and it's just left Pearl Harbour for North Korea. It's supposed to detect, track and target even the smallest of things moving through the atmosphere at high speed. Is this really JUST a radar? Hmmm...

Saturday, 23 March 2013

Right now we're all in a financial airliner. We hit some turbulence in 2008 which woke the pilots up from their sleep, and in 2011 they realised that they were leaking fuel and at some point would have to ditch into the ocean. But instead of preparing the crew and passengers, they've just got the cabin crew to dish out free alcohol and have a party in 1st class.

However there're a few air force pilots in the back of the plane who can see this fuel leak and are trying to warn the other passengers in economy class that something horrible is going to happen unless decisive action is implemented ASAP. But the cabin staff keeps patronising them and telling them that the pilots are very well qualified, have many degrees and know what they're doing. However it's obvious that the crew and airline pilots are very drunk by now. It's 2013 and the whole plane is now completely oblivious that engine No.1 has just cut out.

Now Captain Berninke, despite making some horrific decisions and radio calls is actually a very smart guy. He knows perfectly well what's about to happen, but he's powerless to change the predicament as they are losing fuel and have long gone past the 'point of no return'. But he's under orders from his airline (Goldman Airways) to keep the status quo amongst the passengers and VIPs in 1st class. So he's ordered his co pilot Frederica Reversa and head of cabin crew Julie P Morgain to cover up the inevitable crash as long as possible by dishing out the drinks.

As a result of this constant alcohol stimulus, the passengers in 1st class are having the time of their lives! Everyone is merry and despite the large flow of alcohol, only a small portion of it is reaching economy class. The bankers in 1st class are just keeping it amongst themselves. In a way, this is probably a good thing. If all of a sudden the Tequila slammers and Sambuca poured into economy class, there'd be a hell of a party which would most likely lead to hyperintoxication. Not so long ago, Zimbab-Airlines went bankrupt after they served too much booze on their planes and experienced hyperintoxication. The wise air force pilots on our flight are warning people that hyperintoxication could happen to us, but the cabin crew just keep telling them to shush. Even though 21 airlines have suffered from hyperintoxication in the last 25 years...

Somehow, a group of bickering mothers in economy class have managed to sneak a few bottles of whisky onto the plane. But the alpha mothers, Germania and Belgica have been trying to ration it as the party girls Italine, Espagnie and Gretel have borrowed too much and are suffering from an awful hangover. However, the rest of economy class are shocked when Belgica, out of the blue, just forces her way into Cyprissy's handbag and steals some mini wine bottles.

Engine No.2 has now cut out....

All of a sudden, economy class are beginning to worry a bit as Belgica seems to be a bit of a bully and are wondering if she can steal other people's alcohol. But oblivious to everyone there's a passenger called Mr. Prutin who's quietly furious about Belgica stealing Cyprissy's alcohol. As Cyprissy was a bit of a shrinking violet who never attracted much attention, Mr. Prutin thought it was a safe idea to store his secret alcohol in Cyprissy's handbag. So it turns out that over 80% of Cyprissy's alcohol was actually Mr. Prutins. Now despite all attention being on the mothers to see if they start drinking or hiding their alcohol from Belgica, the air force pilots are concerned about Mr. Prutin. He’s a quiet stocky guy with a strong right hook and he’s been known to source his Russian Vodka from dubious sources. He’s been asleep throughout the whole flight but is evidently miffed about the Cyprissy situation.

Now the wise air force pilots who actually predicted the turbulence in 2008 and 2011 have long since donned their rare Sliver & Glod parachutes. As a result of this, some of the other passengers in the back like Mr. Prutin, Mr. Chow, Mr. Kahn and Mr. Singh have paid attention to the air force pilots and have started to put on their Sliver & Glod parachutes. However they’re not just stopping there, instead of swapping and sharing their alcohol (as they know it will only worsen the situation), they have started to hoard and accumulate as many parachutes as possible. In fact Mr. Chow has got dozens of his young cousins to rummage around the aircraft and bring back any materials which they can use to make and hoard more parachutes. But Mr. Chow is quite the cheeky one as he’s started to sell a lot of fake parachutes to the other passengers…

As a result of this parachute accumulation frenzy, the other passengers are starting to ask some questions, but the cabin crew just keep dismissing the queries. They just keep saying that Goldman Airways always stores enough parachutes for everyone aboard stored in the special Fort Socks vault in the cockpit.. However the air force pilots are skeptical about this as Germania recently asked Captain Berninke for her parachutes she stored there and Berninke said it would take 7 years to deliver them. Despite it taking only 4 months to deliver Mr. Vuvuzela’s parachutes 2 years ago…

Now while all of this is going on, Mr. Sayonara, who’s been drinking his sorrows away for the duration of the flight, has suddenly announced that he’s now going to hold a drinking competition and that the last one to ‘down their drinks’ is a loser. The air force pilots are now very worried because every plane flight they've been on where there’s been a drinking competition, it always ends badly. Nasty words are said and fights always break out. It also doesn't help the situation that there’s a drunk guy called Mr. N. Cornea who’s got ‘little man syndrome’ and in an attempt to gain credibility has just brandished a 9mm pistol…

Monday, 18 March 2013

Ellie (fiancée/house executive) and I are going back to our roots and have recently moved house from Leicester to Norwich. Now normally on long journeys I insist on listening to an audiobook of some sort to capitalise on this dead time (to Ellie’s usual protest), but on our last trek back to Norwich we listened to a music radio station for the first time in a while. I soon remembered why I don’t listen to the radio much due to the tripe that’s on it, and Ellie’s not fond of Radio 4 but what I found amusing on the news piece is that another bank has been found guilty of fraud and cooking the books and all they got was a slap on the wrist. The radio then just flowed nonchalantly onto the next story. It’s amazing how that we’re all so used to hearing of banking sector scandals these days that we just shrug and mention nothing of it. Surely I can’t be the only one who’s outraged and slightly shocked that nothing’s being done to fix these continuous scandals? I think part of the problem is that we as a whole think that we can’t fix it all as it’s way over our heads. People tend to think that unless you have a whole alphabet of letters after your name, you shouldn’t go near finance and the banks. Also I don’t think that many people actually fully understand the real significance and extent of this ‘banking cancer’ because if we did, I’m sure there’d be a revolt!

So like with any issue, a full comprehension of the topic is a good start, so I’ve done the leg work for you and compiled a small list of some of the things the banks have been caught doing recently:

LIBOR scandal

UBS carries out unauthorised trading, loses $2.3 Billion and tried to cover it up by cooking the books in order to not become nationalised during the 2008 crisis.

Wells Fargo were fined $175 million for discriminating against certain races.

JP Morgan lost $5.8 billion from a trade that went wrong. This was made using customer funds.

Standard Chartered (a UK bank) were fined $327 million for illegal dealings with rogue nations. Then fined again for $340 million for being caught doing over $250 billion of transactions with Iran and making hundreds of millions in profit from fees.

A former Goldman Sachs Director, Rajat Gupta was fined $5 million and jailed for 2 years for sharing inside information.

Kabul Bank siphoned $861 million out of war-torn Afghanistan by issuing fake loans.

The wife of Philipp Hildebrand (former Chairman of the Swiss National Bank) made £322 000 by buying US Dollars just before the SNB manipulated their currency by grossly devaluing the Swiss Franc. The ‘Swissy’ was becoming too strong against the Dollar and it was hurting Swiss exports. Hildebrand has recently quit his position due to this ‘insider-trading’.

HSBC has recently been fined £1.2 billion for money laundering for drug cartels, terrorists and rogue nations. They also facilitated 25 000 undisclosed transactions with Iran (despite UN sanctions) over a 7 year period.

Barclays Bank has just been caught committing fraud by hiding £11.5 billion from their balance sheet by giving it to a Qatari company. Then using that company to re-invest it back into Barclays to help the share price. Barclays have only been fined £290 million.

I could continue, but I think you get the point. Bear in mind that these are only a few examples of the times the Banks have actually been caught red handed. Who knows what else they’re doing which is going unchecked? It’s also comical how they’re treated once they are caught. They are simply slapped with a small fine, effectively told to not do it again and at worst, given a bit of bad press in the papers. That’s all. It’s extremely rare that anyone actually ends up in jail so there’s no real deterrent. Most of these fines are below $500 million and it may seem large, but I can assure you that it is simply loose change for the banking world. It’s like you making hundreds of thousands of Pounds in profit from running an illegal Ponzi scheme, laundering money for drug dealers, going to the casino with your grandmother’s pension money, then get caught red handed by the Police and simply given an ASBO with a £4.50 fine. Now if you actually did get caught doing all of that in real life you’d be on the front page of the Sun newspaper, fined and imprisoned for years. You’d be more hated by the public than Tesco Value lasagne. Now for fear of sounding a bit crazy, it’s almost as though the Banking Industry has got such an influence and grip on politicians and the Government that they’re simply helpless to do anything about it. And these fines are just lip-service to appease the law in some manner. I may be completely wrong about this, so please enlighten me if I am, but I just can’t see any other reason. I’m pretty confident that the Government relies heavily on private funding/donations from the financial sector in some way, but as I said, I’m just speculating here. My only aim for this article is to just make you slightly more aware of the Banks so that you understand their propensity for huge profits and how far they’ll go to procure it. Stay tuned, as I’ll be explaining in 6 year old language just exactly how they make their money day to day. You’ll be scarily surprised to the core…

Thursday, 14 March 2013

This video quickly explains how it's highly possible that we could experience a Stock Market correction any time within the next few months. The scale of this is likely to match that of the 2011 crash, but there is scope that it could escalate into something as large as the 2008 sub prime mortgage (housing bubble) collapse.

This would force the UK into the commonly used 'triple dip recession'. Could this be the start of the huge Bond market bubble popping? Could be, but I don't think the currency/bond bubble will pop just yet. It's probably got another year or 2 before we see that happening...

Thursday, 31 January 2013

Now this is a pretty strong statement. This 'fact' is being bounded around the internet quite a lot at the moment and so with all bold headlines like this, one needs to be wary. This is where you need to get your Due Diligence hat out and do some digging around before you take any action upon it because I'm sure there are many Silver dealers out there who have just used this 'fact' (without investigating it) in order to sell more Silver. So let's break this down a bit. It all started a decade ago when the US Geological Survey published a report that Silver could be totally exhausted by the year 2020 and that it was looking likely that Silver would be the first element on the periodic table to become extinct! As you can imagine, this caused a ruckus amongst the investing/Silver world and the majority of links on Google about this, stem from that very statement from the USGS. However, what a lot of sites fail to mention is that a few weeks after this statement, the USGS released an ammendment to their Silver comment and stated that Silver wouldn't be 100% exhausted from the Earth's crust, they just meant that by 2020 it would be economically unfeasible to mine for more Silver at those prices (roughly $4 an ounce).

So is this 'fact' true then?

Partly. Well it really depends what source you look at. There are several notable Geological companies/organisations around the world that specialise in analysing minerals and the Earth etc and all the results vary. In fact, if you look at the most recent USGS report from 2011, it now states that there's around 17 billion ounces of Silver left in the crust. So with the world consuming roughly 1 billion ounces per year, that indicates another 17 years before Silver becomes 'extinct'. As I said, different reports issue different figures and after hours of Googling (I made it to page 24) the general consensus does indicate that we have anywhere between 8-17 years left of Silver reserves in the Earth's crust. HOWEVER, we can't just stop there. There's a lot more to this scenario to appreciate.

The USGS wasn't incorrect in stating this, they just lacked a bit of detail to their fact. Either that, or people in general have ignored the finer details. There's a big difference between Silver becoming extinct and Silver becoming economically unfeasible to extract. Despite it's increasing rarity due to huge global consumption, Silver will never become 'extinct'. It will always remain in existence in the form of posh cutlery, ornaments, antiques, electronics, clothing and medicine etc. But there will come a time whereby it's economically unfeasible to extract more Silver from the ground. At this point, to all intents and purposes, (especially for investing) it will have the same effect as becoming extinct. It's at this point where I wouldn't be surprised to see crazy Silver prices like $10 000 an ounce and upwards. Rhodium entered a similar situation between 2004-2008. There was a global deficit in supplies and so it went from $500 an ounce all the way up to $10 000. And Rhodium isn't even half as in demand as Silver.

So how long do we have then?

This is where the USGS is partly correct. There may be around 15 years left of Silver in the crust, but we only have about 7-8 years left of economically feasible Silver to extract (at these current prices). You see there's a common misconception in the rare earth mineral world between rarity and scarcity. Silver is very rare in the periodic table, but it's also extremely scarce. This means that the Silver deposits in the Earth's crust are of small volume and are scattered all over the place. As a result of this 'peppered' location of deposits, it's just a waste of time/effort and money to set up a drilling operation for such a small return. So normally they don't bother. It's like being in a football stadium with loads of 1p coins scattered around it and there's a few stacks of £20 notes dotted around. If you only had an hour to collect as much cash as possible, you'd just go straight to the big deposits of money and would ignore the 1p coins.

Also due to Silver being extremely undervalued and under-priced at the moment, Silver is simply a byproduct of base metal mining operations like copper and zinc mines. These companies just get small amounts of Silver and sell it on for minimal profits. Also a lot of people are unaware of how time and money consuming mining is. From the moment a feasible deposit is found, it normally takes 7+ years to set up a producing mine! So we do effectively have 7-8 years left of Silver available.

BUT...

There's more to this story. What a lot of people have overseen (including the USGS) is the availability of diesel. 97% of all transportation in this world is completely reliant upon diesel. This is mostly because trucks and lorries are the backbone to our way of modern life, which is why nations go to war for oil. It's the 'Weetabix' of every country and more importantly, mining operations are 100% reliant upon diesel. No diesel = no mining. So how are diesel/oil reserves doing I hear you wonder? In a word: badly. How bad? Well you remember when BP messed up and spewed oil all over the Atlantic in 2010? That Deepwater Horizon oil reserve was one of the largest oil finds in recent history. Probably within the last 15 years at least. So even if BP managed to extract every single barrel of oil from that oil well, it would only be enough oil for just 24 HOURS of world consumption! I won't labour the point, but the human population is in exponential growth as is our consumption of oil. But oil reserves are dwindling fast. Please read my previous article, 'http://siamkidd.blogspot.co.uk/2013/01/nuclear-power-shale-hype-and-ignorant.html' for more info on this. But if we continue with the rate of wars waged as we've seen, and with oil reserves as it is, I wouldn't be at all surprised if we only had about 5 years left of feasible Silver to mine due to rapidly increasing oil prices. Just putting it out there...but only time will tell...

CONCLUSION

In a nutshell, the USGS were partly correct. We currently have about 15 years left of Silver in the planet, but we only have about 7-8 years left of economically feasible Silver available for extraction. So combined with Silver being far rarer than Gold in investment form, prices need to increase 1000% before dedicated Silver mining operations start and the world is now buying 3 times more Silver than Gold, the next 1-5 years are going to be extremely interesting...

In the meantime, I'll continue building my financial Ark of Silver and Gold in preparation for this economic Perfect Storm brewing in the horizon...

Friday, 25 January 2013

Back in 2012 I indicated to my subscribers that one should be extremely careful about buying Apple shares. This was around the time that Apple shares hit an all time high of $700 and pretty much every other person and their dog that I spoke to had bought their shares or was about to start piling into it. The general consensus was that Apple was a great company with great products, it's outperformed nearly every other share out there and that they were still producing innovating products. And if you said or thought that, you'd be quite right. They are a very profitable company and have completely revolutionised pretty much every industry they've jumped into like portable music players and phones. To be honest, I used to be a bit of an Apple junkie and had iPhones from the start, all the way up to the 4, but I'm afraid the prices of a share go far deeper than being a 'great company with great products'. To an extent it's about supply and demand of the said share but Apple was always doomed for being a bubble once it got the attention of mutual funds and hedge funds. Its own fame was its nail in the share price coffin...

You see it really doesn't matter what the company is or what it does once a few big mutual funds targets it. I'm being very general here, but what tends to happen (mostly in the States) is that people with a bit of spare cash to invest go to a mutual fund and speak to an investment advisor. These advisors are normally just sales people and just pump whatever stock is paying the juciest commissions. And if the mutual fund is quite big, the chosen stock normally starts to rise. This attracts more investors and there you go, you've got your bubble started. Netflix is a key example of this. However there's only so much interest and people to buy a certain stock and you normally get to the point where there's simply no one left to buy this new super stock. But the hedge funds (normally coined as the smart money) notice this as they tend to be ahead of the curve and exit the stock to realise their profits. This doesn't help the bubble stock one bit and the price tends to start falling. Then you eventually get to a pivotal point where everyone starts a mad dash to try and grab their profits before it crashes even further and the rest is history. This happens all the time to good and crap companies and I'm afraid to say it Apple lovers, but Apple is a bubble. I called the top of $700 and said it would probably fall to about $400. Well looking at the price today, it's crashed down rather fast to $452. That's a huge 35% loss in the last few weeks.

But surely it'll rise up again?

No is the simple answer. In order for Apple shares to climb to their previous highs, there needs to be some intense economical stimulus like QE5, or Apple needs to completely revolutionise another sector...perhaps TV? But the main reason why there is next to no hope for them is due to the Nasdaq 100. This index is simply an average of the 100 biggest/most traded tech companies in the States like Google, Apple and Amazon etc. So when the Nasdaq is going up, US tech companies are doing well and vice versa. However when you look at the weekly chart, we're seeing a textbook Head and Shoulders set up. In a nutshell, this is a very strong (and reliable) reversal signal. So it's very likely that in the next few months, we'll see it testing the neckline. If this then breaks below it, this will then start the long anticipated market correction I've been talking about for the last few months. It'll bring down the other indexes like the S&p 500 and the Dow.

Summary

I'm currently shorting Apple and the Nasdaq. Getting ready to short the S&P and the FTSE and for anyone reading this, please have a long hard look at your current share portfolio. In particular, look at their history. If your share did well during the 2008 and 2010/11 crash, you may be ok, but if it didn't, things could get rather stressful for you in 2013.

Note: I am completely out of the stock market. I only trade on the movement of it and the only things I invest in is physical Gold, Silver and Melina trees.

Monday, 14 January 2013

I didn’t really pay much attention to the US elections a few months ago, but
what I did hear which interested me were the blatant lies/propaganda that both
sides were saying about energy and oil. This of course caught my attention. Romney
in particular pressed on that we’re about to have a ‘Shale revolution’ and that
the US will be oil sufficient within 5 years and that the US has about 500 years’
worth of Shale gas. Now Shale gas has been a favourite topic of investors, commentators
and mainstream analysts – many of whom claim we are about to enter a new energy
era with cheap and abundant Shale gas leading the charge. So is Shale going to
be the wonder energy to replace crude oil and save us from our ‘Peak Energy
Cliff’? Or is this just going to be another bubble? So to save you the effort,
I’ve been quietly doing my due diligence into this sector for about a year now
and on closer examination of these incredible claims/figures and things just
don’t add up. So we’ll quickly go through:

•
Shale…how goes it.

•
Why Japan can’t afford to abandon nuclear power.

•
Why green energy won’t make a meaningful impact for many years.

•
Why Romney and Obama know next to nothing about fossil fuel energy.

So
how are things shaping up for Shale at the moment?

Well
a lot of investors from particularly the oil-rich parts have been making some
pretty high-risk investments in the United States for many years and, for a
long time, those investments were in real estate. As we know, a lot of people/organisations
got burned with US real estate in 2008 so now a lot of these investors have
shifted their focus and are putting funds into Shale. There are 3 pertinent
things going on here:

i.)This
capital isn't going to last forever, especially since Shale gas is a commercial
failure. Shale gas has lost hundreds of billions of dollars and investors will
not keep on pumping money into something that doesn’t generate a return. These
type of investors aren’t ‘day traders’ but they definitely don’t invest like
Warren Buffett (buy/invest and hold forever). They’re in this for profit/capital
appreciation/dividends and cashflow. Shale isn’t providing any of them at the
moment other than hope and potential.

ii.)People
always ignore the decline rates that Shale reservoirs experience. Well, I've
looked at this and the decline rates are incredibly high. In the Eagleford Shale,
which is supposed to be the mother of all Shale oil plays, the annual decline
rate is higher than 42%. That means they're going to have to drill hundreds, if
not 1000 wells in the Eagleford Shale, every year, to keep production flat. Just for one play, we're talking
about £6-8 Billion a year just to replace supply. When you add all these things
up and it starts to approach the amount of money needed to bail out the banking
industry, where is that money going to come from? The Fed certainly isn’t going
to print it for them. They’ve got their balance sheets full already buying
toxic T-bonds that the world is now shying away from.

iii.)Quantity
vs quality. Yes there may well be 500 years’ worth of Shale in Northern
America, but how good is it? I.e. How many joules of energy do you get back for
every joule you put in to extract it? If we go back 100 years to the Goa fields
of Arabia, the sweet crude they got there gave them about 99 joules back, per joule
spent. Where are we now? Crude right now is only giving back about 6 joules if
we’re lucky. Shale? 2 – 2.5. How long will Shale last where it’s economically
feasible to do so?

So
on the outset, things don’t look too peachy for Shale at the moment. And with
all of this hype that’s constantly bounded around about Shale, especially now
that Romney and Obama were talking about it, I’m afraid that this is looking
prime for becoming a bubble.

How
quickly could this bubble pop?

Well,
it depends, as with all collapses, on how quickly the collapse occurs. The
worst-case scenario would be that several large companies find themselves in
financial distress. A large company called Chesapeake Energy recently had a very
close call. They had to sell billions of dollars’ worth of assets just to
maintain paying their obligations. So if this can happen to Chesapeake, it’s
highly probably that if a couple of big bankruptcies occur, these investors
will pull back, all the money evaporates, all the capital goes away. Goodbye Shale.
For the time being anyway. But of course, that’s the worst case scenario and no
one has a crystal ball, but this is a probable outcome. Am I putting my own
money on the table? No, not yet. I won’t be shorting it either, but it’s
definitely something to keep an eye on. I’m currently all-in on Silver at the
moment.

If Shale
had its 15 minutes of fame in the US elections, surely there must be some
substance behind it?

Mitt
Romney really pushed and talked about how the US would be able to achieve
energy independence in 5 years. Well, I know he’s a big deal over there and I’m
an average Joe in Norwich, but that's simply poppycock. Anybody who knows
anything about oil, gas and coal, knows that that's absurd. The US were
producing a little over 6 million barrels a day thanks to an all-out effort in
the Shale oil play. But the US consumes 15
million barrels of oil a day and that leaves the gap of 9 million barrels per day. At the peak
of US production in 1970s, they only produced 10.6 million barrels per day. So
I’m afraid he really doesn’t know what he's talking about, or he was just
willing to say anything to get the votes.

So
if not Shale, what about Nuclear energy then? Should we ditch it like Japan and
Germany?

No.
I’m not a nuclear expert, but from my research, Japan is a special case. For a
start, the Fukushima reactor was right on top of a major fault line. So, that seems
to be an incredibly dumb place to put it. And to completely abandon nuclear
power because one reactor was stupidly planned, to me, seems like a bit of a
knee-jerk reaction. But who knows what’s going on behind the scenes in the
Japanese government. Their currency is crashing, they’re on QE9, they’ve been
hit full on with a natural disaster and the economy has declined for over a
decade now. And here are the bones of Japan’s situation:

i.)They
have no oil.

ii.)They
have no coal.

iii.)They
have no natural gas.

So
if they get rid of nuclear energy, what are they going to do? I don’t know why
no one’s really asking this question? If you don't have anything of your own,
how are you going to get what you need? The answer is that they have to import
LNG and that's very expensive. Right now, natural gas is selling in Japan for
$17 per million BTUs (British Thermal Units). You can buy the same BTUs in
Europe for $9 today or in the US for $3. They’ve also started piling billions
of Dollars into Solar energy (which is great for Silver prices), but the energy
provided from that barely compares to the power that their nuclear plants
produce. It’s like trying to power a car with a hamster wheel.

So
that brings us nicely to Germany and for them to abandon nuclear…that decision
is truly delusional because they haven't had any problems over there. Nor is
Germany particularly earthquake or tsunami prone. They have forced themselves
into a love relationship with Russia so I think that either I’m missing a big
piece of the puzzle here or there are deals going on there hidden from public
view. And with the dodgy track record of these Russian oligarchs, that doesn’t
seem that crazy. Just follow the money…

So
what about renewable energy sources then? And what about future technology?

Now I
have all the enthusiasm and hope for technology as we humans are pretty clever.
But a good rule of thumb that I heard once is that if it's not on the shelf
today, then a solution is no sooner than 10 years in the future. So, when people
talk about fancy algae, storm energy harnessers and A Rossi’s E-cat machine,
just bear in mind that it's not on the shelf today. So yes, eventually we’re
going to have some ingenious solutions, especially with the discoveries of Graphene
and Silicene, but simply nothing is going to help us in the coming 5-10 years.

Whilst
we’re on the topic of energy, something that slightly annoys me is that environmentalists
talk about the evil of fossil fuels and the carbon emissions that they produce
etc, but have they really done their research to see how vital it is to pretty
much everything that we base our modern lives upon? For instance, pretty much
97% of any goods or products revolve around trucks and lorries. The food in
your fridge, the fridge itself, your newspaper reading glasses and pretty much
every object you can think of has been created using oil and delivered to you by
oil (diesel). So I’m afraid we as a species is hooked on oil and our dealer
(Earth) is rapidly running out of supply. In my opinion, prices for anything
tangible like Gold, Silver, Timber, Gas, Oil and also renewables can only rise in
the medium to long term. These are great prospects if you’re an investor or
newbie investor.

I’m
aware that Governments have the best and brightest advisors who know a lot more
about their respective fields than I. But this is just my 2 cents on it all. So
to summarise, we need nuclear power, Shale is probably going to be a bubble, we
need to pay more attention to world oil consumption/supply decay and
politicians know next to nothing about the markets!

It looks as though Silver is beginning to slowly enter the public arena with this short BBC piece on Silver. A lot of people get a bit confused with Silver. Whilst a lot of people agree that it will rise extraordinarily if we suffer a calamitous economic collapse, for Silver to rise, we do not actually need a market failure. Even though a crash of some sort would speed up the Silver rocket, one has to bear in mind that currently only 1% of the world is investing in it. If just another 1% (140 million people) buys just 1 ounce of Silver (£30) in the same year, that would create a huge squeeze in supply and demand which would send Silver to at least $150 an ounce (500% increase). The US is already experiencing a semi squeeze as its US Silver Eagles are selling at all time highs (which is creating considerable delivery delays for us dealers) and the world is now buying 3 times more Silver than Gold. And with the Gold to Silver ratio now 55:1, this ratio simply cannot last. But if we take this just one step further, I personally don't think we need another 1% of the world to start investing. If just a handful of the worlds richest families cottoned on to Silver....that may just do it. Having said that, the pension schemes in Japan are now about to allocate just 1% of the nations pensions into physical Gold and Silver. That's a huge amount of metal that will be delivered to Japan. 2013 is going to be a very interesting year...

Sunday, 6 January 2013

Recently, I found out that one of my 'friends' had been talking behind my back about how I was some sort of 'conspiracy nut' and that my video www.HedgingAgainstUncertainty.com was just some elaborately long sales and propaganda video. I'm not one for discord but suffice to say I confronted him about it all and that conversation sparked several issues which I thought were good lessons in terms of market knowledge/conspiracies and trust. So let's start with the conspiracies.

This topic always makes me chuckle as it's human nature to be cautious of something you're unfamiliar/have no knowledge of. Just like in the old days (or even today), technology in remote tribes would be construed as sorcery or magic. The same applies to conspiracy theories. Yes, there are a lot of 'nuts' out there who believe in all sorts of crazy things (like Scientology), but there are lots of conspiracy theories that have actually been later proven to be true. Events like the CIA's 'Project MKULTRA', the Enron scandals and even more recent, the huge LIBOR scandal. If I said last year that the biggest banks in London were working secretly together to manipulate and fix interest rates, you'd probably take that story with a huge truck of salt. But sitting here in 2013, we've seen that it was in fact 100% true. In fact it was larger and more horrid than initial thoeries suggested. We now know that the City of London is one of the most corrupt places in the financial world, UBS have also been naughty and HSBC has been caught money laundering for terrorists and drug cartels in Mexico. But this is nothing new. What you'll find when studying cycles and history of finance, is that during the lead up to huge economic shifts, these 'conspiracies' occur a lot more frequently and a fair percentage of them end up being true. There were numerous financial scandals proven to be true in Germany in the lead up to the Nazis taking over, Zimbabwe during their hyperinflation and also in Argentina. It's rife. When there's large sums of money and/or power in the mix, there's bound to be some greedy crook lurking in the background. So what should we believe in these days? Well with life and in investing, I'm always open-minded. The moment you become narrow-minded, you can sometimes find yourself drinking your own 'Kool-aid', so when these new 'fanciful' conspiracy theories pop up, I now pop on my Sherlock Holmes hat and investigate it with an open mind and armed with Ockham's Razor. This razor principle pretty much means that one should believe the most plausible solution until this solution is proven otherwise. Or the one with the fewest assumptions in the equation.

So I'd now like to share with you a comment and a bit of background about my 'friend' I mentioned earlier. I've known him for about 5 years, he's a hard working professional. Good at what he does, earns well, gambles with online poker and also dabbles in the Stock Market. He's also lost a lot of money in the Stock Market. NOTE: Anyone who says that they dabble with stocks and shares is more often than not in the red and has now resorted to a buy and hold principle in the belief that their share is a 'ten bagger' and will recoup their losses.

So in this conversation he said something along the lines of:

"You must take me for a fool trying to get me to believe that all of the worlds banks are conspiring against us by actively manipulating and suppressing Gold and Silver prices. They just have no need for it, it would be too obvious and so many people would have to be in on it."

Well for someone who knows very little about the Gold and Silver market, this is actually a fair assumption. He's sub-consciously applying Ockham's Razor which is good. However it was obvious that he was being very narrow-minded and stubborn in his stance and no matter what I next said to him would convince him otherwise. So I didn't bother. It's not my place to convert people into 'believers'. All I do is present the facts and when they come to an informed logical conclusion and want help in investing in precious metals, I can then guide them. However, as a friend, I couldn't help but think that despite him having a good job (which he'll probably do very well in the future) he should know about this stuff as what happens in the Gold and Silver market may very well affect the economy in a huge way. This will then affect his job. I literally had a whole list of things in response to his statement like:

i.) If Barclays and other international banks fix and manipulate interest rates, it can also be done with Gold and Silver prices.ii.) If UBS can commit fraud in Sep 2011 by losing $2 Billion from unauthorised trading and then covering their tracks, it can also be done with Gold and Silver.iii.) If the Federal Reserve can 'LOSE' $9 Trillion, then fixing Gold and Silver would be relatively simple.iv.) If rising Gold and Silver prices directly indicates to the public that the banks are doing a very bad job at managing the currency supply and are also losing them billions every day, why wouldn't they fix the prices?v.) In the 1960's they had the London Gold Pool whereby in order to keep the structural integrity of the Bretton Woods system, the worlds banks openly fixed, suppressed and manipulated Gold prices in order to keep Gold at $35 an ounce. If it's been done before, why is it so hard to believe now?vi.) There HAVE been whistle blowers. Andrew Maguire was a 40 year trader and former Goldman Sachs trader. He testified in court, '"JP Morgan acts as an agent for the Federal Reserve; they act to halt the rise of Gold and Silver against the US dollar. JP Morgan is insulated from potential losses (on their short positions) by the Fed and/or the U.S. taxpayer." He then went on to give detailed reports of how they do this and even predicted when the next round of price fixing would happen. And it happened exactly how he said. It's also coincidental that there was a hit and run incident soon after he gave his evidence....vii.) Due to JP Morgan's vast short positions on Silver, it's been reported that for every Dollar that Silver rises in price, JPM loses $100 million. I'm still trying to verify this statement, but even if this was partially correct, why wouldn't they fix the price of Silver?viii.) It's very obvious when they slam Silver prices. Just cast your eyes back to a post I made a while back.

I could go on, but you've probably got the hint. It's probably fair to say that my 'friend' has a lot of reading up to do if he is to ever fully understand this market and make an informed opinion of it or even profit from this information. But this also brings us nicely to the point of TRUST.

From bad experiences, I've adopted the rule that in the world of investing, you shouldn't trust ANYONE. Even more so if a person is trying to sell you a financial product. Even if they're a fully qualified Financial Advisor and have a plethora of letters after their name and they work in a fancy corporation. At the end of the day, they get a commission from products that they promote. (For IFAs reading this, I'm aware of RDR - that's for another blog post later). So if you do invest or are thinking of trading/investing in something whether it's Timber, Stocks or Silicene, it's worth approaching the investment how I do with conspiracy theories: open-minded and investigate the investment until you know everything about it. Then only invest once you have a solid reason(s) why you're putting your hard earned money into it. So going back to my 'friend', one of the reasons why he found this Gold and Silver malarky so hard to believe is because he probably didn't trust me (a bullion dealer). Which is good. At least he's doing something right!

Wednesday, 2 January 2013

Unless you've been living under a rock, you would have most likely heard about this 'Fiscal Cliff' dilemma in the States. Your first reaction may be 'if this is a problem over the pond, why should we be worried/bothered?' Well as explained in more detail on www.HedgingAgainstUncertainty.com - when the US sneezes, the world catches a cold, so it's kind of a big deal. If the US falls back into recession, guess what's likely to happen on the world stock markets? And the answer isn't up...

So in simple terms, what is it?

I always view politics as simply a high school popularity contest. When you remove all the fancy jargon and big job titles etc and view politics in this perspective, things can be a lot easier to understand. So between 2001-2003 President Bush got into power and started losing favour amongst the people pretty quickly. People weren't happy with the wars (until 9/11) and they were rapidly expanding the currency supply to pay for all of these Middle Eastern excursions. So in order to gain favour, Bush simply instigated some rather hefty tax cuts across the whole spectrum of taxes. The result? He became the classroom's favourite leader again and US debt and deficits began to increase at a faster pace.

Then what happened is that when the expiry date came near, the tax cuts were simply continued. This was similar to buying a large round of drinks on a night out and putting it on the tab. Then when the bar man wants to call your tab in, you just put another round of drinks on it.

So what is this cliff bit?

Well like with any form of borrowing and lending, there's always a limit. And in a nutshell, we've now reached that limit. So the barman has now refused to sell anymore drinks until you actually pay what you owe.

Haven't they come to a solution?

No. Not at all. They've had this massive looming elephant in the room for a decade now and all they've done is kicked the can down the road for another 2 months. They made a big hoohah about leaving it until the 11th hour before coming to a solution but they've just postponed making the hard decisions. What they've done is keep the tax cuts for families earning under $450 000 a year and haven't reduced any government spending. This will result in an extra $4 trillion in debt over the next 10 years.

What's likely to happen now?

Well looking at the charts, the market is showing that it's now 'risk on' so we'll likely see vast rises in the stock markets as we've already seen with the FTSE 100 crashing by over 100 points to 5860 before the Cliff and it now jumping up to over 6020. So in 2 months when the Vice President has to 'sell' this solution to the Senate, Fiscal Cliff 2.0 is likely to be a lot worse with a possible debt ceiling being in the fray. In the medium to long term, I'm still expecting a huge stock market crash in 2013, so if you are thinking of buying any stocks, just make sure you know exactly why you're about to do so. And definitely do a double check if you're about to buy Apple shares!

So
what's this whole 'Debt Ceiling' about then?

Simply
put, due to the Petro-Dollar arrangement with Saudi and OPEC (will cover this
in future publications-very interesting stuff) the US has been able to
essentially get free oil for the last 40 years. This is because all oil
transactions have to be done by the Dollar (until recently) and so whenever the
US needs to import oil, it just prints off a few billion Dollars. Also, the Fed
has just been printing more and more currency willy nilly. The US has had lots
of wars to pay for with fake printed currency, trillions in military research
and all sorts of other Government programs. They're currently running with over
$120 Trillion in unfunded liabilities and a few years back, the Fed somehow
'LOST' $9 Trillion! YouTube 'Fed loses money', the hearing is eerily hilarious.
As a result of all of this spending, they US debt is now over $16.4 Trillion.
To put it into context, if the US was an average man earning $20 000 a year,
his equivalent debt would be over $200 000. This would lead to insolvency very
quickly and that’s what's happening with the US. But debt just can't continue
rising unchecked indefinitely, there's always a limit. And that limit is
nearing rather quickly. A good analogy is that if a sewage pipe broke under
your home and your house completely filled with excrement to the ceilings.
Would you raise the roof or would you remove the shit....?